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Author: Sabuhi H. Sardarli Publisher: ISBN: Category : Languages : en Pages : 92
Book Description
The second part of the study focuses on efficiency tests on retirement plan menus. I illustrate how testing for efficiency in 401(k) plan offerings depends on the benchmarks used. I also show that, for specific benchmarks, spanning can be attained without optimization. However, based on return style analysis, I show that, relative to these benchmarks, performance can be significantly improved through optimization. My results are consistent with a recent study that suggests that smaller 401(k) menus are objectively more efficient and with a large literature that has noted participants' subjective propensity to prefer smaller options in decision making. Here I make a strong case for plan sponsors to recommend specific funds to help with plan efficiency. Plan participants can then adopt allocations with which they are comfortable. This approach contrasts with recent recommendations for default strategies and educational programs targeting participants who are viewed as the main source of plan inefficiency.
Author: Sabuhi H. Sardarli Publisher: ISBN: Category : Languages : en Pages : 92
Book Description
The second part of the study focuses on efficiency tests on retirement plan menus. I illustrate how testing for efficiency in 401(k) plan offerings depends on the benchmarks used. I also show that, for specific benchmarks, spanning can be attained without optimization. However, based on return style analysis, I show that, relative to these benchmarks, performance can be significantly improved through optimization. My results are consistent with a recent study that suggests that smaller 401(k) menus are objectively more efficient and with a large literature that has noted participants' subjective propensity to prefer smaller options in decision making. Here I make a strong case for plan sponsors to recommend specific funds to help with plan efficiency. Plan participants can then adopt allocations with which they are comfortable. This approach contrasts with recent recommendations for default strategies and educational programs targeting participants who are viewed as the main source of plan inefficiency.
Author: Youngkyun Park Publisher: ISBN: Category : Languages : en Pages : 160
Book Description
This dissertation studies underfunding in defined benefit (DB) pension plans and firms' contribution behavior, 401(k) plan participant investments in lifecycle funds under plan sponsors' initiative, and fund commonalities within mutual fund families. Responding to the recent decline in DB pension funding, firms have increased pension contributions to their underfunded plans. In the first essay I empirically examine firms' contribution behavior to underfunded DB plans and funding choice for pension contributions. I find that firms reveal different sensitivities of pension contributions to underfunding across aggregate funding levels. Furthermore, at a lower funding level firms have the greater sensitivity of pension contributions to underfunding and significantly utilize the tax deductibility of pension contributions. As for a funding choice to fund pension deficits, firms use debt financing at a low funding level, but utilize internal funding by decreasing capital expenditures at a lower funding level. Firms that use the debt financing are likely to have investment-grade credit ratings or high debt leverage, while firms that use the internal funding are likely to be high-levered ones. Recently lifecycle funds have rapidly grown in self-directed retirement plans. Despite the increasing popularity among plan sponsors and participants, there are few empirical studies on lifecycle funds. In the second essay, I examine the recent lifecycle fund adoption behavior of 401(k) plan participants from 2004 to 2006. I find that the likelihood of participants changing an investment strategy to adopt lifecycle funds is not significantly affected by participant demographic characteristics, but by participant account and plan design features. This study extends our understanding of 401(k) plan participants' investment behavior by finding (1) that the substitution of lifecycle funds for balanced funds, as well as the designation of lifecycle funds as a plan default, strongly affect participants' investments in lifecycle funds and (2) that balanced fund holdings of participants are negatively associated with their lifecycle fund investments. Mutual funds account for a significant portion of household financial assets and retirement assets. An understanding of characteristics of mutual funds is crucial to fund investors--especially those whose retirement nest eggs are in mutual funds. In the final essay, I examine the impacts of fund commonalities within mutual fund families on fund characteristics in terms of return residual correlations and fund operating expenses. As fund commonalities within a fund family, I focus on common stock holdings and common management of funds. I find that common stock holdings and an existence of a common manager of funds are positively related to return residual correlations, but negatively related to fund operating expenses. This finding suggests that when investors select low-cost equity funds within a family, they should be aware that there exists an investment risk that the fund commonalities that lower fund operating expenses may additionally increase return correlations of the funds.
Author: Hungyee Fong Publisher: ISBN: Category : Annuities Languages : en Pages : 142
Book Description
The first chapter "Investment Patterns in Singapore's Central Provident Fund System" investigates how plan participants in a national defined contribution system invest their pension accumulations. I find that only a small fraction of participants elects to invest in outside investment products like professionally-managed mutual funds. Simulation results using cost data from over 200 funds demonstrate that the minimum hurdle rate of return a fund must generate is about five percent a year. Accordingly, more policy attention can be devoted to lowering fund commission charges and rationalizing the investment menu offered to participants. In the second chapter "Longevity Risk Management in Singapore's National Pension System", I evaluate the money's worth of life annuities and discuss the implications of the government entering the insurance market as a public-sector provider for annuities. I find that commercial insurers offer competitively-priced annuities with money's worth ratios averaging 0.95, which are on par with those in other developed countries. On the other hand, the new annuities launched by government under an annuitization mandate are estimated to provide money's worth ratios exceeding unity. This will benefit annuitants on average but implies that the annuity mandate will be expensive for the government if current pricing continues. The third chapter "Beyond Age and Sex: Enhancing Annuity Pricing" assesses how adopting more detailed pricing schemes may help reduce adverse selection in annuity markets. Prices of standard annuity products in the United States do not currently reflect buyers' personal characteristics other than age and sex. I show that several readily-measurable risk factors can significantly increase explained variability in mortality outcomes in a proportional hazards framework and use them to construct alternative pricing schemes. Simulation results show that more detailed pricing may help reduce adverse selection in annuity markets because shorter-lived groups are made much better off (and thus enter the market) while longer-lived groups are made only slightly worse off (and thus remain in the market).
Author: Allison T. Cole Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
In Chapter 1, joint work with Bledi Taski, we pose the question: how do workers value retirement benefits relative to wages and what impact do these benefits have on firm hiring? We find that dollars paid in employer contributions to 401(k) plans have nearly double the effect on a firm's recruiting success than dollars paid in wages. However, the effect is driven primarily by high-income and higher-age occupations. We use two novel instruments to identify the results: 1) IRS mandated non-discrimination testing of retirement plans and 2) corporate policies of national wage setting. We then develop and estimate an on-the-job search model which shows that the average worker requires only a 0.25 percentage point increase in employer contribution dollars to offset a 1% decrease in wages. Again, retirement valuations are positively correlated with salary. We confirm the channel in an online survey setting: participants are willing to give up total pay to get a higher employer match to get a non-matching employer-sponsored 401(k). The results imply that 80% of firms could improve their probability of a job offer being accepted by increasing 401(k) contributions. Chapter 2, joint work with Jonathan Parker, Antoinette Schoar, and Duncan Simester, documents the share of investable wealth that middle-class U.S. investors hold in the stock market over their working lives. This share rises modestly early in life and falls significantly as people approach retirement. Prior to 2000, the average investor held less of their investable wealth in the stock market and did not adjust this share over their working life. These changes in portfolio allocation were accelerated by the Pension Protection Act (PPA) of 2006, which allowed employers to adopt target date funds (TDFs) as default options in retirement saving plans. Young retail investors who start at an employer shortly after it adopts TDFs have higher equity shares than those who start at that same employer shortly before the change in defaults. Older investors rebalance more to safe assets. We also study retirement contribution rates over the life-cycle and find that average retirement saving rates increase steadily over the working life. In contrast to what we find for investment in the stock market, contribution rates have been stable over time and across cohorts and were not increased by the PPA. In Chapter 3, I use administrative data on very small businesses (median 5 employees) to measure the effects of the Paycheck Protection Program (PPP). Firms that applied for PPP increased employment by 7.5% relative to similar firms that did not apply. The positive effects on employment occur primarily in industries which were less affected by COVID-19: industries with more employees that are able to work remotely, those that have fewer hourly workers and essential businesses. Novel data on hiring shows that PPP worked as intended by preserving employment matches. My estimates imply a cost of approximately $270,000 per job-year at small firms.
Author: Steve Vernon Publisher: Rest-Of-Life Communications ISBN: 9780985384661 Category : Business & Economics Languages : en Pages : 184
Book Description
Make Smart Choices with Your Social Security and Savings! Are you thinking about retiring soon, or have you recently retired? Don't Go Broke in Retirement, the latest in a series of acclaimed books by trusted retirement expert Steve Vernon, gets right to the point and shares an easy-to-follow, three-step plan that helps you answer these critical questions: Have you saved enough money to retire? When should you start your Social Security benefits? What's the best way to build lifetime income that's protected from financial crises? What living expenses should you reduce to make retirement more affordable? Based on the "Spend Safely in Retirement Strategy," the plan was developed from new research by the Stanford Center on Longevity and the Society of Actuaries. Learn why this strategy has garnered national attention and discover how the recent financial turmoil successfully stress-tested this plan, proving its effectiveness for managing retirement funds. Don't Go Broke in Retirement provides the information and tools you need to generate the most retirement income from your Social Security benefits and retirement savings, including: A simple, step-by-step checklist to help you put your plans into action Modifications to personalize the strategy for your goals and circumstances Access to bonus chapters to help you apply the strategies outlined in the book, including investing in retirement, navigating tax rules, and finding professional help with retirement funding strategies A list of helpful resources and research to learn more Don't worry about your retirement! Instead, develop solid financial strategies so you can confidently enjoy your retirement years.
Author: Peter R. Orszag Publisher: ISBN: Category : Business & Economics Languages : en Pages : 164
Book Description
Aging Gracefully gathers a collection of essays that highlight policy ideas for promoting greater retirement savings among Americans. The essays were written as part of the Retirement Security Project, which is dedicated to promoting common sense solutions to improve the retirement income prospects of millions of American workers. The project is supported by The Pew Charitable Trusts, in partnership with Georgetown University's Public Policy Institute and the Brookings Institution. The essays included in this volume address issues such as: How an automatic 401(k) would encourage greater savings. How better structured 401(k) investments can reduce risks and increase growth. What impact the preferential tax treatment given IRAs and 401(k) plans has on low-income families. How IRA-contribution matching by employers can encourage low- and middle-income families to save more.
Author: Sabuhi H. Sardarli
Author: Sabuhi H. Sardarli
Author: Youngkyun Park
Author: Hungyee Fong
Author: Allison T. Cole
Author: Henry M. McMillan
Author: Filip Uzelac
Author: Steve Vernon
Author: Tongxuan Yang
Author: Peter R. Orszag
Author: Helen Saar